Gary Weiss

Nardelli’s value to society, apart from printing very nice pamphlets on how to install sinks, is that he is the living embodiment of the Falk/Reles Theorem. He and his board of directors put to rest all the pap that has surrounded CEO pay in recent years.

The prevailing explanation of executive compensation is that, on the whole, CEOs and other titans of finance are fairly paid, so go away and leave them alone. This philosophy has been propounded by Jack Welch, who as CEO of General Electric was no stranger to humungous pay and perks. Call it the “Scarce Athlete Theory of CEO Overcompensation,” after the analogy that Welch has used everywhere from “Hardball With Chris Matthews” to “The Colbert Report.”

This theory holds that the paunchiest CEO is among the Randy Johnsons of his generation, in the same league as the best-paid major league baseball players. Its principles are as follows: 1) People who have the rare talent to be “CEO material” are scarce; 2) scarce people, like athletes, earn commensurately high salaries as dictated by the free market; 3) CEOs should be paid like athletes, rock stars, Pablo Picasso and other talented people.

Appearing on “Hardball” last July, Welch drew parallels between the executive compensation process and the Major League draft. “Everybody is out with their checkbook and wallets trying to get somebody, and agents are having a ball. They’ve got three weeks. [CEO compensation is] no different, Chris,” Welch said.

This is where Nardelli earns his pay — by showing the absurdity of that analogy. Unlike baseball players, who get tossed out on their rears when they louse up, the Nardellis of this world stay on and on, through one disaster after another. It is front-page news when CEOs drive the train wreck required to get fired, and even then they often pull themselves out of the wreckage and climb behind another throttle.

Nardelli was signed for a Michael Jordan-size contract, but he did a poor job and still walked away with a fortune. “Questions about his compensation, business strategy and autocratic management style mounted,” the New York Times said diplomatically in its front-page article on Nardelli’s ouster. In other words, he was an overpaid SOB who was fired for cause. Most people who are fired for cause are lucky if they walk away with two weeks’ compensation, even if they are not SOBs.

The Scarce Athlete theory is predicated on another fallacy, which is that CEOs rise to their positions in a kind of Darwinian struggle, gnawing away at each other until the survivor emerges, a kind of King of Corporate Rat. That is true in some instances. But then you have the rather large number of public companies — including media outfits such as the New York Times and the McGraw Hill Companies — where the struggle for the corner office does not illustrate the survival of the fittest, but the survival of the first born. Some very bad (and good) CEOs run family-owned firms, and they get the usual scarce-athlete pay. I don’t know any pro baseball player who passed a big-bucks contract on to Sonny Boy even though Junior couldn’t hit a ball with a banjo.

Defenders of executive overcompensation say that we all ultimately benefit from the largesse bestowed upon incompetent, greedy and arrogant CEOs. All that grubbiness eventually “trickles down” to the rest of us, they say, repeating the arguments that conservative economists used to defend the Reagan slash-and-burn tax cuts. There is truth to this. Give the rich more to spend, and they will eventually toss a few nickels toward the rest of us, very much as Abe Reles boosted the economy of Brooklyn by supporting the manufacturers of durable goods (ice picks) and the garment industry (pearl-gray fedoras), along with their families, vendors and so on.

In the end, Abe was ejected by his board of directors not with a lovely parting gift, but by being tossed out the window of a hotel on Coney Island. Executives today should be grateful for their golden parachutes. Lord knows, Abe could have used one.

But that doesn’t mean that those of us who aren’t won over by Paul should just dismiss the guy as a nut, which seems to be a popular practice in news organizations. I don’t think he’s been terribly forthcoming, especially on those newsletters, but you can’t deny that Paul has a number of positive qualities that moderates and liberals need to understand and appreciate, in order to effectively counter his views:

1.  He has integrity. I grimace as I write this, but it’s true. Perhaps not compared to Mother Teresa, but certainly he does when stacked up against pretty much any other politician I know, including more than a few Democrats. (He obviously has more integrity than Mitt Romney, but that’s not saying much.) His consistent dedication to the same ideals, the same causes — obsessions, actually — cannot be seriously disputed. A perusal of his books, House of Representatives floor speeches and miscellaneous bloviating over the years shows that the man has been hammering away at the same isolationist/monetary/no-government/”Constitution” themes for decades. He has opposed the war on drugs for decades, just as for years he has opposed the Civil Rights Act of 1964. Mind you, he’s not always internally consistent, in the sense that he takes positions that stray from the libertarian ideal: taking earmarks for his district and stridently opposing abortion. But on most issues you can expect that his rigidity on matters of ideology will shine through, no matter how politically inexpedient.

2. He’s likable. Paul doesn’t give off mean-S.O.B. vibes like Newt Gingrich. He’s rumpled, and walks with the head-forward bad posture of a slightly distracted junior college professor, shuffling along, late for his next class. He doesn’t make a big show of bullying debate moderators as Gingrich has been doing (though he has walked out on an interview). Though his positions are even more uncompassionately conservative than Romney’s, he comes across with considerably more warmth (again, not saying much). His delivery on the stump is folksy, not fanatical. He talks about cutting $1 trillion out of the federal budget like your family doctor telling you he’s got to take out a gallstone. It’s good for you. It won’t hurt for long. Paul is often compared to the old man in the neighborhood who shoos the kids off his lawn, but he reminds me a lot more of Sen. Eugene McCarthy, the antiwar Democrat of the 1968 campaign. He doesn’t have McCarthy’s urbane wit, but that’s asking a bit much.

3. He’s smart, and in a nice way, unlike Gingrich or Romney. He doesn’t lecture; he doesn’t talk down to people. I think this explains a great deal of his appeal to the young. He’s this generation’s Mr. Wizard, the affable TV science teacher who taught baby boomers how refrigerators operate and how to get electricity out of a spool of wire and a magnet. Ron Paul’s Mr. Wizard character similarly reduces complex issues that people don’t understand into simple concepts amenable to simple solutions, such as abolishing a good part of the federal government and getting rid of the income tax. Yet he is able to embrace these off-the-charts positions in a manner that doesn’t make them seem extreme. It takes a genius to do that, and I don’t mean that in a nice way.

4. He knows the American people are fed up. He’s struck a chord with a lot of people I respect. His talk about American “empire” makes many a progressive feel warm and fuzzy. More than any other candidate — including President Obama — he understands how tired Americans are of being underemployed, exploited by the big banks and sent to engage in nation-building overseas. Sure, his policies would entirely wipe out regulation of banks, but he gets away with it from sheer force of personality. (And yes, I can already see the comments — the hedge fund managers and bankers support Romney. Sure they do: because he’s going to get the nomination.)

Paul’s views on foreign policy hearken back to the Republican isolationists of the 1930s, the Robert Tafts and Gerald Nyes, and he similarly taps into the latent Heartland “fortress America” mentality. He cannily exploits the paranoia that has long characterized American politics, and the deep-rooted dislike of foreign entanglements that has been dormant for decades. There’s an aroma of the old America First movement to much of what he says about foreign policy, and that’s scary to people who’ve read a lot about the 1930s, and know that we’d all be speaking German today if the Firsters had gained power. But they didn’t. Most people don’t give a hoot about what happened five years ago, much less 70.

5. He talks some sense. That’s what Paul haters have had a lot of trouble digesting: He’s an extremist on most issues who makes a lot of sense on foreign policy. He’s the only antiwar candidate in 2012. Even people who don’t agree with him totally on foreign policy have to admit that his opposition to the U.S. getting involved in Libya is looking smarter as every day passes, as do his views on staying out of the maelstrom in Syria. Sure, it’s insane for progressives to support a candidate who wants to turn back the clock on the New Deal and Great Society, as I pointed out a few weeks ago. But Paul has outsmarted us. He knows that dismay about Iraq and Afghanistan is strong enough to overcome any lingering doubts about his foreign policy views among a staggering number of people who’d otherwise find him repugnant.

The solution, I think, is the same one that applies to the spreading influence of another extremist who has gone mainstream, Ayn Rand. What’s needed is not shunning but debate, and an understanding that his positions need to be viewed as part of an organic whole. Anyone who reads “Atlas Shrugged”  knows that laissez-faire capitalism is just part of the Randian package. So are atheism and a lot of other concepts that people in the Tea Party don’t always recognize when they brandish those “Who is John Galt?” posters.

It’s the same with Ron Paul. If you swallow his foreign policy, you guzzle down laissez-faire capitalism as well, whether you like it or not. So, sure, he makes sense on Syria, but he has one of the worst records on the environment and global warming of any member of Congress. That’s just one part of the price tag. It’s a long list.

Politics is compromise, and so do the choices that voters have to make. Those of us who oppose Ron Paul believe that his positions are too extreme to warrant compromise. But we need to understand why so many reasonable people feel differently.

There’s a simple reason for that:  Preet Bharara is not busting Wall Street. He’s not collaring the masters of the meltdown. He’s done nothing to even slightly discomfit Wall Street’s still-ferocious money machine, or has yet to bring to justice the architects, enablers and continuers of the 2008 financial crisis — the bankers who got us into that mess, and the ones who are continuing to extract pain from foreclosed homeowners, in the New York area and beyond.

As a matter of fact, his over-hyped insider-trading prosecutions, the main focus of the Time piece, are doing the Street a favor, by targeting people who actually ripped off Wall Street — individuals like hedge fund managers Raj Rajaratnam and Danielle Chiesi, who functioned a bit like the goons who used to dope race horses in the old days.

Bharara’s insider trading targets rigged the game for their own profit by illegally misappropriating information, in effect stealing from their employers and other investors, just as the horse-dopers cheated racetracks and other betters. Another analogy, also from the racetracks of old, would be to the scam artists who used to “past-post”: bet on races after they knew the outcome.

That’s how insider trading works. It’s a form of theft and cheating. It’s bad. Bharara was right to prosecute them, just as he has aggressively pursued drug gangs in the outer boroughs. But let’s be clear on something: The big players, the Goldman Sachses, Merrill Lynches, Banks of America and so on, don’t like insider trading any more than Preet Bharara does. And none of his criminal prosecutions to date — including his recent bust of three high-ranking former Credit Suisse execs, accused of rigging the value of mortgage bonds they held in 2008 — had any connection to the pain being felt by Americans today, which can be directly traced to the misconduct of mortgage bankers and derivatives traders in the run-up to the financial crisis.

The real perps of the financial crisis haven’t been in Bharara’s — or the Justice Department’s — cross hairs for a single moment since Barack Obama took office three years ago. It’s one of the most troublesome failings of his administration.

What almost upended the economy was not insider trading, but dreck. (Look it up.) Misleadingly marketed, overcomplicated subprime and Alt-A mortgages were sold to homeowners, often using fraudulent methods. Those dreck mortgages were then packaged by Wall Street as complex derivatives and sold to banks, large investors and insurance companies like American International Group. Along the way, the likes of Lehman Brothers utilized gimmickry to shunt their mortgage-dreck liabilities off their balance sheets.

It was a story of screw-ups and villains, whose screwing up and villainy have been described in a number of best-selling histories of the financial crisis, as well as the final report of the Financial Crisis Inquiry Commission. Insider traders just weren’t part of the picture. And if you don’t believe me, see if you can find one reference to Time’s so-called masters of the meltdown in the FCIC report, or even one mention of insider trading in that voluminous tome.

The financial crisis was the culmination of a fundamental conflict between the so-called financial services industry and the interests of society as a whole. To maximize their returns, and thus their bonuses, Wall Street firms ratcheted up their use of leverage and engaged in proprietary trading strategies that ultimately proved to be harmful to society, when those strategies failed. Government regulation failed to prevent them from hurting us. The result was a series of immensely unpopular bailouts conducted by the Federal Reserve and Treasury Department, which were forced to clean up the mess that they created.

Today, of course, the right has turned the facts of the crisis upside-down, turning it into a failure of government and not out-of-control capitalism. Dodd-Frank, now under attack from the Republicans —and dead meat if Obama is defeated — cut into leveraged-fueled trading strategies and, hence, bonuses. That law hit Wall Street where it hurts: in the wallet. While Dodd-Frank, the actual bane of Wall Street, has preventing the Street from hurting the rest of us by cutting into its earnings, Bharara was engaged in his insider-trading prosecutions, which were worthy and nice as far as they went, but never came close to throwing sand in the gears of the money machine.

So it’s a stretch, to say the least, for Time to compare Bharara with Eliot Spitzer, the New York attorney general of a decade ago. Spitzer actually impeded the way Wall Street did business, by assaulting the conflicts of interest that then abounded in the research departments of large Wall Street brokerage firms.

The same can be said for comparing him to his predecessor from the 1980s, Rudolph K. Giuliani. Though Giuliani in later years became a kind of megalomaniac self-parody, in his prosecutor days he went after genuine big wheels, Michael Milken and Ivan Boesky. None of the six Bharara targets arrayed across the top of pages 24 and 25 in the U.S. edition, their profiles tinged blood red, came anywhere close to rising to that kind of Gordon Gekko-like status.

Now, this is not to say that there aren’t some wide-awake prosecutors out there, ready to tackle real issues of concern to real people, and not headline-grabbing insider trading cases. There is at least one — in Boone County, Mo., where a grand jury just handed up a 136-count indictment against a home foreclosure service, DocX, for using forged documents against homeowners whose houses are being seized by banks.

Is Missouri a hotbed of foreclosure crime, and not the Big Apple?  Don’t make me laugh. In Brooklyn, the banks’ tactics are so sleazy that a New York State Supreme Court judge, Arthur M. Schack, has single-handedly fought against the banks’ sleazy tactics in foreclosures. It’s a job that really should be tackled by Bharara. This is a state, mind you, where the debt collection industry is so out of control that the New York state attorney general, the now-Gov. Andrew Cuomo, asked a judge in 2009 to throw out 100,000 faulty judgments against consumers who were victims of unscrupulous collectors.

The closest Bharara has come to tackling foreclosure fraud — the most serious, ongoing source of consumer pain to arise from the financial crisis — was his November 2011 suit against a mortgage broker for fraudulent lending practices. A civil suit, not a criminal case. As for the day-in, day-out practices that Judge Schack has been wrestling with in his courtroom for years: nothing so far.

I happen to think that Bharara is a decent guy, albeit with his priorities poorly chosen. If he starts going after the real bad guys he will finally deserve to get all the puff pieces he’s now inspiring. But for now, definitely not.

The subject hasn’t come up very much in the debates, and Romney hasn’t volunteered much on his stance toward financial regulation, certainly not as much as Newt Gingrich, who gave a little-noticed speech pledging his fealty to Wall Street’s agenda, in detail, in 2006. We know that Romney opposes Dodd-Frank, as do all the other GOP candidates, so he’d roll back the only steps Congress has taken to heighten scrutiny of the financial industry. But that’s about it.

Still, he has offered up a significant clue in recent weeks. Just listen to his attacks on Newt Gingrich in South Carolina and Florida and you hear something chilling: a man who is either deceptive about the financial crisis of 2008, or is as deluded as a Tea Party fanatic about the origins of the crisis. That unsettling choice, combined with his record as a steely-eyed job-slasher at Bain Capital, means that he would most likely be a horror when it comes to preventing banks from treating the 99 percent like those little companies Bain used to squeeze.

I’m talking about Romney’s attack on the former House speaker for his well-compensated “consulting” for Freddie Mac, the government-sponsored enterprise that bought up mortgages from the big banks and fed the monster of the financial crisis. There you find not just the business-as-usual hypocrisy that has become a feature of this dreary campaign, but an implicit endorsement of a factually incorrect, widely repudiated theory of the origins of the financial crisis.

It’s hard to calculate, but there’s little doubt that the Freddie Mac attacks contributed significantly to Romney’s victory margin in Florida. His latest gimmick is a “reward” for Gingrich’s Freddie Mac contracts, which remain undisclosed. The point being not so much that Gingrich got paid a lot of money — something that Romney can hardly dispute — but that he was paid by a government-sponsored entity that, by his telling, is primarily responsible for the financial crisis. That’s the key. In his stump speeches in Florida he has said that Gingrich “made $1.6 million in his company, the very institution that helped stand behind the huge housing crisis here in Florida.”

Here is how Romney spun that yarn at a debate on Nov. 9: “The reason we have the housing crises we have is that the federal government played too heavy a role in our markets,” he said to applause. “The federal government came in with Fannie Mae and Freddie Mac, and Barney Frank and Chris Dodd told banks they had to give loans to people who couldn’t afford to pay them back.”

I’ve heard that same line of malarkey a bunch of times, mainly from Tea Party people and Ayn Rand devotees: that the government, through the Community Reinvestment Act and Fannie Mae and Freddie Mac, was directly and primarily responsible for the financial crisis. Not out-of-control banks. Indeed, note his language. The banks were told to loan money to people who can’t afford it.

Embracing this mythology of the right, Romney has rewritten the history of the crisis as a fairy tale in which the banks were mere pawns in the service of the real villain: the government. It’s pure fiction. The contention that the CRA played a pivotal role has been refuted “up, down and sideways,” as Paul Krugman once put it.  For one thing, most subprime lending was made by institutions not subject to the CRA. Commercial real estate lending, “which was mainly lending to rich white developers (not you-know-who) is in much worse shape than subprime home lending,”  Krugman noted.

There’s little doubt that Fannie Mae and Freddie Mac contributed to the financial crisis. As Gretchen Morgenson has pointed out, they “amplified the housing boom by buying mortgages from lenders, allowing them to originate even more loans.” That was their job, to encourage home ownership. But as the Financial Crisis Inquiry Commission pointed out in its final report, “they were not a primary cause.” They participated in the risky subprime and Alt-A loans that were made by the banks only after they were made. The real abusers of the housing bubble were the mortgage lenders who dreamed up the super-complicated loans that they foisted on people who couldn’t afford them, and the Wall Street banks that packaged them into financial weapons of mass destruction.

Those “toxic waste” mortgage-backed derivatives ultimately exploded in the portfolios of American International Group, Merrill Lynch and other financial institutions. Poor judgment, greed, ridiculous compensation: All had nothing to do with Fannie and Freddie.  Yet you never see them mentioned by the right, or by Romney.

As with the Community Reinvestment Act, Fannie and Freddie had no role in commercial real estate and obviously didn’t contribute to the global real estate mania, which rampaged out of control in countries like Germany and Greece. They certainly committed a long list of misdeeds of their own, of course. The top echelons of Freddie were recently the long-overdue subject of Securities and Exchange Commission charges a few weeks ago. On Monday, ProPublica and NPR revealed the shocking story of how Freddie Mac bet that U.S. homeowners would be stuck in high-interest loans, at the same time that Freddie was making it harder for them to escape from those loans.

There will probably be more stories like that in the months to come. But the myth that Fannie and Freddie were the prime movers behind the financial crisis — in league with congressional liberals like Barney Frank — is a crock, concocted by the right for ideological reasons, to perpetuate the myth that banks were over-regulated, not inadequately regulated.

This alternate version of the history of the financial crisis, which Romney is embracing, is, in other words, a lie, what one astute financial observer, Barry Ritholtz, has called “The Big Lie” of the era. “Some [of the people pushing this nonsense] stand to profit from the status quo,” Ritholtz writes. “Others are hired guns, doing the bidding of bosses on Wall Street.” And then we have Romney, who knows perfectly well that it’s a lie — he didn’t get to be a multimillionaire by subscribing to crackpot theories — but also knows he must  pander to his party’s right wing if he hopes to win the White  House. Either that or, more remotely, he believes the swill he has been pushing.

Whether dishonest or deluded, Romney is a worrisome  potential guardian of the public’s interests against Wall Street abuses. Whatever the fate of his presidential aspirations, Mitt Romney has already accomplished a great deal for his cronies in the 1 percent, by further coarsening the national dialogue.

Judging from those remarks and the brickbats he has thrown at Mitt Romney, ripping into his record as a former slash-and-burning private equity guy, you’d think that Gingrich doesn’t much like Wall Street. Au contraire. A testimony before Congress in 2006, when he was still in the “consulting” business, shows that Newt Gingrich is a passionate defender and advocate of the interests of the securities industry, and passionate about making life hard for consumers, investors and anyone who has a beef against Corporate America.

Since he doesn’t have to disclose such things, it’s not known which client or clients paid Gingrich to appear before the capital markets subcommittee of the House Financial Services Committee on April 26, 2006. He didn’t appear to be directly pushing the interests of Freddie Mac, the client that has gotten the most attention. (Of course, it’s possible that the former House speaker was just a citizen speaking his mind, and if you believe that, there’s a bridge over the East River I want to sell you.) What we do know is that he was unabashed in his advocacy of the Street, tailored to the concerns of the bankers in those carefree pre-crash days.

It’s surprising that Gingrich’s Republican opponents, who also carry water for the Street but are not above hypocrisy, haven’t mentioned his testimony so far. It can be found in the pdf link in this congressional Web page, which is the transcript of a thoroughly routine hearing titled “America’s Capital Markets: Maintaining Our Lead in the 21st Century.” Gingrich’s testimony begins on Page 14, and his prepared statement, bearing the imprint of Gingrich Communications,  is in the appendix on Page 102.

This wasn’t Gingrich as a lofty “historian” but Gingrich the policy wonk, deep in the weeds, pushing the Wall Street agenda. He quotes the American Enterprise Institute copiously and repeats right-wing talking points on tort reform.

Gingrich began by recommending the gutting of Sarbanes-Oxley — the legislation, passed after the Enron scandal in 2002, that was a weak attempt to deal with corporate chicanery — on the grounds that complying with its simple provisions was “too expensive.” Sarb-Ox discomfited public companies by requiring them to swear to the accuracy of their financial reports, and also set up safeguards against accounting chicanery by creating a Public Company Accounting Oversight Board (PCAO).

Gingrich contended that “fundamental overhaul of Sarbanes-Oxley” would prevent stock listings from fleeing overseas, similar to the argument often made by the right — and equally bogus — that raising taxes will send corporations fleeing across the Atlantic. He wanted Section 404 of Sarbanes-Oxley, which requires companies to report on the state of their internal controls, to be made voluntary and not mandatory.

“This approach,” he said, “would be well suited to a market economy and a free society.” And, he might have added, it would be well-suited to companies like Enron and WorldCom, which cheated their investors by deciding not to have particularly good internal controls.

Gingrich also wanted Congress to take a stand for haziness in accounting, something that would be like manna from heaven for companies desiring to fudge their numbers. He told the committee that it was necessary to “state clearly that Congress does not have the naive belief that accounting is something objective, but rather understands, as every financial professional does, that accounting is full of more or less subjective judgments, estimates of the unknowable future, and debatable competing theories. As the saying goes, it is art, and by no means science.” This sounds less like a line from congressional testimony than something Max Bialystock might have said in “The Producers.”

And just to be sure that little old ladies could continue to be ripped off by the crooked-CPA Leopold Blooms who work for the Max Bialystocks producing corporate “Springtime for Hitler,” Gingrich would have hobbled the Public Company Accounting Oversight Board, which is supposed to keep a watchful eye over the auditing firms that certify to the correctness of corporate disclosures.  Gingrich’s proposal would have turned it into a political football under the aegis of the notoriously corporate-influenced Congress. He wanted the PCAOB “subject to appropriations, oversight and a normal appointments process.”

That all sounds technical, but it’s not. Gingrich would have rolled back the only, slim protections that the public received from crooked companies after the scandals of a decade ago. And he was just getting warmed up.

At the time, state attorneys general, led by the morally dodgy but aggressive New York Attorney General Eliot Spitzer, had been ripping into Wall Street analysts who put out misleading reports that were often tinged by conflicts of interest. That made Spitzer the most hated man on Wall Street. Gingrich would have none of that. He would not only “rein in state Attorneys-General” who were annoying Wall Street, but would see to it that states are not allowed to have securities law that might be tougher than federal regulations at protecting investors.

“We must have a uniform national set of securities regulations,” Gingrich told Congress, pushing a longtime securities industry priority. “To the extent that state Attorneys-General are encroaching in this rule-making area, then the Congress should direct the [Securities and Exchange Commission] to preempt such state action.” Translation: Goodbye states’ rights, if they discomfit bankers. He calso astigated the state attorneys general who “have reaped publicity and political advantages through their pursuit of multi-state litigation targeting the tobacco, pharmaceutical, software and financial services industries. A few Attorneys-General have gained national attention by speaking to the media during the pendency of investigations.”

In Gingrich’s administration, you could forget about states taking action against corporate malfeasance, such as the coordinated action against Big Tobacco in the 1990s. At the time Gingrich lamented the tobacco settlement, in which the cigarette makers were forced to yield to a coordinated assault by state A.G.s. “This blackmail model of Attorneys-General championed by New York’s Eliot Spitzer, which mugs companies without going to court, is a job killer,” he said. “These practices must be stopped.”

Gingrich moved on to another longtime item on Wall Street’s wish list, “litigation reform,” aka “tort-reform.” Simply put, it is aimed at making it harder — if not impossible — for private citizens to face off in court against big corporations, as either plaintiffs or defendants. In his 2006 testimony, he spoke up for a particularly pernicious trend: the privatization of justice. Over the years, the ability of consumers to take businesses to court has been eroded, with a variety of companies — banks, credit card companies, cellphone outfits, brokerages and even some Internet retailers — requiring customers to take any disputes to arbitration, where they often are put at a disadvantage. Efforts in Congress to address this pernicious issue have stalled.

Under the subhead “Arbitration Preferable to Litigation,” Gingrich hewed closely to the corporate line on this hot-button consumer issue. Then he took the privatization principle one step further. Gingrich said, “Everyone should know that rapid, inexpensive arbitration is preferable to litigation. Cases involving technical knowledge should go first to panels of experts (health courts in the case of medical malpractice), but plaintiffs should be able to appeal to a court if they feel cheated. They should, however, have to carry the result of the expert panel with them into the litigation.”

If enacted, such a sweeping change in the court system would effectively screw every person who has ever been a victim of bad professional services, be it medical malpractice or crooked stock market brokers, because a “panel of experts” — and not an impartial jury — would determine the outcome. The ability to appeal such panels would be meaningless, if they have to “carry the result” into court. “Expert panels” are already forced on brokerage customers, who are required to forgo their right to a court trial, and bring cases to securities industry panels instead. The brokerage arbitration system has been widely criticized as a network of kangaroo courts.

Gingrich would further tilt the playing field against ordinary citizens by creating a “losers pay” system, with possible treble damages imposed on plaintiffs found to bring cases “without substance.” Obviously, such a system would make lawyers more reluctant to take potentially difficult cases, as the tobacco litigation was in the 1980s when most courts ruled against people suing tobacco companies.

As if that’s not enough to cripple the ability of people to sue corporations, Gingrich would dismantle the entire system of class action litigation, making it impossible for law firms to organize lawsuits against companies. In many cases, such as asbestos litigation, attorneys have proactively sought out clients. No longer. Instead “the injured parties should originate the lawsuits and hire the law firm,” Gingrich said. “The judge should have the option of opening the class action lawsuit to competitive bidding to find the least expensive law firm for the injured parties.”

Some of that sounds like a litigant-protection scheme, but it’s not. Had that system been in effect, the aggressive and organized private lawyering that led to the capitulation of Big Tobacco — and which has been used in every major class action, including those involving securities firms — would have been impossible. Sure, class-action lawyers are sometimes sharks, sometimes dishonest or even criminal, but Gingrich would attack those sharks by, in effect, poisoning the ocean.

Note that Gingrich, on behalf of his unidentified client or clients, went well beyond protecting Wall Street. His was a wide-ranging attack on the interests of consumers and investors — the people whose votes he is seeking in Florida. Naturally, he doesn’t care to talk about it on the campaign trail, except to insist, against the evidence, that he did not act as a lobbyist but as “a citizen.”

“As a citizen, I’m allowed to have an opinion,” as he told the New York Times last month.

The identity of whoever paid him to appear before Congress in April 2006 is really beside the point.  Gingrich was expressing heartfelt views. If he becomes president and delivers on his pro-Wall Street crusade, he will make Ronald Reagan seem like Ralph Nader.

ABC said it reviewed documents showing  that Romney deposited  millions of dollars of his personal wealth “in investment funds set up in the Cayman Islands, a notorious Caribbean tax haven.” Let’s be clear: this is perfectly legal. It’s also, for a businessman, perfectly ethical. The tax laws allow it, as long as it isn’t used to evade taxes—as Romney’s people insist. But it also stinks, as Romney is utilizing the same kind of offshore havens that organized crime and white-collar criminals use to avoid detection. In other words, it’s very much like pretty everything else Romney did at Bain Capital: it looks dreadful to the people who lines up at the polls on Election Day.

Don’t think for a moment that all the negative press Romney is getting, like this latest bit of merry news or the front page leader in the New York Times, is going to go away if he gets the GOP nomination. This isn’t the invention of the liberal media. It’s Romney’s chickens coming home to roost. It’s going to stick. So when you see the Newt Gingrich super-PAC’s half-hour video describing what happened when “Mitt Romney came to town,” that is just an appetizer. The banquet follows in the fall, if and when Mitt gets the nomination God willing, and the Democrats start running against him.

The latest revelataion complements my analysis last week of Romney’s rampage through the most fragile industrial companies of America in the 1990s. It’s now reasonably well established that Romney represented the most reckless forces of American capitalism. He is the anti-Warren Buffett, a status that the Sage of Omaha himself reinforced a few days ago, when he told TIME magazine ““I don’t like what private-equity firms do in terms of taking out every dime they can and leveraging [companies] up so that they really aren’t equipped, in some cases, for the future.”

This is about the worst publicity the private equity firms have gotten since the early 1990s, when they were savaged as “barbarians at the gate” in the seminal book of that title. In fact, the Romney candidacy is a thrilling development in one sense, as it has commenced a national debate over the noxious giveaway for the 1% known as “carried interest.”

That was denounced at length by Buffett in his TIME interview. While one might argue that Buffett’s attacks on his fellow billionaires is a bit hypocritical, for he rarely argued against such things when he building up his gazillions, he is absolutely right-on when it comes to how outrageous carried interest surely is.

Simply put, it means that the Mitt Romneys of the world—managers of high-end investment vehicles—aren’t taxed at the same rate as the rest of us. They’re a kind of privileged class, with their income taxed at the capital gains rate of 15%, while the rest of us have to pay much higher rates on ordinary income. Buffett has pointed out that most of his income is taxed at that rate, giving him an effective tax rate of 17.7%, while his own secretary, earning $60,000, was taxed at 30%, as an ordinary working person getting W-2 income.

The reason is that Buffett gets the lion’s share of his income in the form of capital gains. That puts him in the same boat as hedge funds that manage money for the wealthy, and the private equity funds of the kind that Romney used to run. Under the tax law, their income from running such outfits is treated as capital gains. Their managers actually do get salaries and fees, but they’re just a small portion of their income. So they pay less in taxes, proportionally, than the guy who comes by after hours to scrub toilets.

Now, if the cleaning person’s income flowed from toilet-bowl company dividends, he would be taxed at the lower capital gains rate. But since he actually scrubs them out, our tax laws put him at a disadvantage. You have to understand the supposed economic purpose of the capital gains rate to understand how wacky this all is. The cleaning person gets taxed more because cleaning toilets doesn’t add value to the economy, in the eyes of the law. The fiction behind lower capital gains rates—the “differential” so holy to the finance—is that if we lavish tax benefits on people who buy and sell stocks, it will increase the amount of such activity, thereby boosting the amount of saving and investment.

It’s all a lot of rot, as numerous studies—such as this Congressional Research Service study from 2010—have proven. All a lower capital gains rate does is cut revenues to the government, without having much useful economic impact. The idiocy of a lower capital gains rate multiplies upon itself when it becomes an enormous boon for the super-wealthy buyout moguls like Mitt Romney.

No wonder Romney isn’t all that anxious to show his tax returns. He has said that he will probably do so in April, but don’t be surprised if he’s home sick with a sore throat on the appointed day. He has said that most of his income is “probably” capital gains and thus taxed at 15%.

If Obama, who has already pledged to end the carried interest obscenity, fails to exploit that issue to the hilt, he should hand in his Chicago Democratic Party membership card.  And that’s not the only Romney vulnerability that he can exploit, apart from his company-killing activities.

Romney has said that he would like to repeal Dodd-Frank law regulating the financial services industry. That sounds like ordinary election-year politics, which it is. But Dodd-Frank has special resonance for the private equity industry. One of the provisions of the law that private equity managers despise is the Volcker Rule, which, among other things, prevents banks from taking a stake in private equity funds. That cuts right into their ability to raise capital.

What this means is that Romney is the last person Republicans want to argue for repeal of Dodd-Frank.

While a renewed national debate over the private equity industry will be welcome, don’t expect any actual improvements in the tax structure or any new strictures on private equity. Don’t expect Congress will do something about offshore tax havens, which are as firmly etched into the granite of the Republic as Mount Rushmore. If anything, Congress will have to fight hard to preserve the Volcker Rule and other provisions of Dodd-Frank. That’s because the private equity industry talks the lingua franca of Capitol Hill: money.

The money-in-politics trackers at MapLight.org have found that contributions to Democrats in Congress from the private equity and investment industry, $17.4 million, have far outstripped contributions to Republicans over the past four years. In fact, these fat cats gave considerably more to Obama than to John McCain in 2008. No wonder bankers like Jamie Dimon, CEO of J.P. Morgan Chase, have been griping all year like jilted suitors about Obama’s sometimes populis rhetoric.

You can’t expect Congress to change its stripes, or give up its “gimme” instincts for campaign contributions. It’s realistic to expect that carried interest, like the unjustified lower rate on capital gains, is one of those injustices that will remain with us until people fundamentally reform the payola-infested campaign finance system. The Volcker Rule, the subject of a congressional hearing today, will continue to be under assault, and the Mount Rushmore of offshore tax havens isn’t about to be blasted to smithereens.

That’s reality. Live with it. Meanwhile, count your blessings: the Republicans have a dream candidate for president.